BSQUARE Corporation
Q1 2021 Earnings Call Transcript

Published: 13 May 2021

[Operator:]

Good day, and welcome to the Bsquare Corporation’s First Quarter 2021 Financial Results Call. Today's conference is being recorded. I would like to turn the conference over to Steven Gottlieb, VP of Corporate Affairs. Please go ahead, sir.

[Steven Gottlieb:]

Thank you, and good afternoon, everyone. Before we begin, we would like to remind you that this call is being webcast and the recording of the call and the text of our prepared remarks will be available on Bsquare's website. During this call, we will be making Forward-Looking Statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially. During this call, management will also refer to GAAP to non-GAAP financial measures. Please refer to the cautionary text regarding forward-looking statements, as well as the non-GAAP reconciliations to comparable GAAP financial measures contained in Bsquare's earnings release issued today on our website at www.bsquare.com under Investors.

[Ralph Derrickson:]

Good afternoon and welcome to the Q1 2021 Bsquare quarterly earnings call. Thank you for taking the time to be with us this afternoon. Our plan as usual would be to take you through the Q1 financial results, provide our perspectives on the business and answer any questions you may have for us today. For anyone who would like to arrange a follow-up conversation, please contact Steven Gottlieb, VP of Corporate Affairs who is responsible for Investor Relations and lead off our call today. Joining me on the call is Chris Wheaton, fellow entrepreneur and Bsquare's CFO and COO. I will get us started and then hand things off to Chris. Q1 2021 was a building quarter for Bsquare from which we believe two conclusions to be drawn. Partner solutions revenue was off modestly largely due to a difference in shipping days. Edge-to-Cloud revenue also declined due to changes in revenue recognition that Chris will cover momentarily. As planned in Q1 2021, we continued investing in the development of our IoT operations services and software growing out of our work with our large IoT customers. You saw the Itron announcement in February regarding the expansion of our relationship. The takeaway from Q1 2021 is that business building is not a linear process are always reflected in our most recent financials. We will continue executing our strategy with focus and discipline. Let me hand things off to Chris now to get into the specifics of the quarter.

[Chris Wheaton:]

Thank you, Ralph, and good afternoon investors. Let's get right to the financial details of the quarter. Total revenue for the first quarter of 2021 was $10 million, 9.9% lower than Q4 2020. Revenue in the Partner Solution segment composed primarily of sales of Microsoft software was down 3% quarter-over-quarter. This modest decrease was essentially difference in shipping days in Q1 2021 versus Q4 2020. After adjusting for the smaller number of shipping days in Q1, revenue in the first and fourth quarters would have been virtually equivalent. Year-over-year comparisons in this segment to the first quarter of 2020 should the depth of the challenges that our Partner Solutions customers have experienced in the 12-months since the onset of the pandemic. Product mix drove a small quarterly increase in Partner Solutions gross margin rates, this quarter is 5.2% result is only 50 basis points less than last quarters, a decline largely attributable to a small shift in Q1 sales away from one higher margin product. Comparisons of year-over-year margin reflects stability in the Partner Solution segment.

[Ralph Derrickson:]

Thank you, Chris. As both Chris and I have shared on this call business building is a process that takes time and requires discipline. We are making the necessary investments in a measured way to position Bsquare for growth. In our press release, you will note that today we also announced that we will be making some changes to our Board of Directors that will be effective on June 10th, the date of our annual shareholder meeting. Andrew Harries will be stepping down as chair and departing the board to pursue other commitments. He will be succeeded by Ryan Vardeman, as Chairperson. Ryan joined the Bsquare Board in 2018 and he is a principal at Palogic, our largest shareholder. Rob Peters also at Palogic will be departing the board as well. Reducing the board size is consistent with efforts already taken by the company to reduce costs and increase focus on entrepreneurial business building efforts. Neither Andrew or Rob have any disagreements with the company and their departures will allow them to pursue other personal and professional endeavors. I look forward to working with Ryan and building value for our shareholders. I want to thank Andrew Harries for his leadership. He was part of a team that recruited me to Bsquare, and I have enjoyed working closely with him these past two years as our chairperson. I would also like to thank Rob Peters for his commitment and service to Bsquare. Rob has been an important mentor and voice of the shareholder for me that I have appreciated and I have benefited greatly from his contributions. Please join me in wishing them both the very best in their future endeavors. Thank you for your time today. Operator, would you please open the line for questions. And while that is happening, let me remind you that if you would like to arrange a follow-up discussion with Chris and me, please contact Steven Gottlieb. Thank you.

[Operator:]

[Operator:]

And at this time there are no questions in the queue. And with no questions in the queue that does conclude today’s call. We thank everyone for your participation. You may now disconnect.